Health Insurance, Health Risk and Agricultural Investment of Farming Households in Rural China

Farming households face intertwined uncertainties in health and agricultural production, raising critical questions about how ongoing efforts of developing countries on social insurance provision and expansion influence agricultural production decisions. This paper investigates the impact of health insurance on agricultural investments, leveraging the phased rollout of a nationwide basic insurance scheme integration in China that enhanced the affordability and accessibility of health care services for rural residents. We provide robust evidence that insurance integration leads high health-risk farming households to significantly reduce investments in food crop production, with expenses on seeds, fertilizers, pesticides, and films decreasing by 7.5%, 8.5%, 7.6%, and 7.3%, respectively. Empirical results suggest that insurance integration mitigates health risks, encouraging farming households to assume greater production risks. This is reflected in reduced food crop diversification, which may explain the decline in its investment. However, there is no significant evidence of increased engagement in other risky agricultural production activities, such as expanding sown areas or investing in cash crops. Importantly, the reduction in food crop investments does not compromise household income. These findings highlight the complex interplay between health insurance and agricultural decision-making, offering valuable insights into social policies aimed at reducing rural vulnerabilities.